EXCLUSIVE | Bifurcation of state-owned GAIL put on hold

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The Ministry of Petroleum and Natural Gas has decided to put on hold the plans to bifurcate state-owned natural gas company GAIL Ltd.

The government's plan was to unbundle GAIL into two companies for gas transmission and marketing business and the state-run company had entrusted Ernst &Young as a consultant for this. The move was seen as a step to bring more transparency into the country's gas market.

According to a source aware of the development, the government does not want to hamper GAIL's ability to borrow funds for its massive expansion plans. The company's plan is to double its pipeline network from around 16,000 kilometre to 34,000 kilometre.

The source added that the reason for holding the bifurcation was that a separated entity will not be able to raise funds at rates in which a combined balance sheet of GAIL can get.

Finance Minister Nirmala Sitharaman had announced in her Budget that pipeline assets of IOC, GAIL, and Hindustan Petroleum Corporation Ltd (HPCL) will be monetised. He said that GAIL may monetise some of its pipelines through instruments like Infrastructure Investment Trust (InvIT).

GAIL is India's biggest natural gas marketing and trading company. It contributes to over 70 percent of the country's pipeline network. Over the years, users of natural gas had complained over not getting ‘equal and fair access’ to GAIL’s pipeline. In order to solve this conflict coming out of the same entity handling both the businesses, bifurcation of GAIL was initially planned.

The government has laid a road map of increasing the share of natural gas in the country’s energy basket to 15 percent by 2030, from the current 6 percent. The expansion of pipeline network is considered to be vital in achieving this target.